US President Barack Obama will unveil a budget this week that seeks to boost spending on new initiatives such as road repairs, education programs and tax breaks for the working poor while avoiding an increase in US deficits.
Obama has made reducing the gap between the rich and poor a centerpiece of his agenda for his next three years in office. However, he is limited in his ability to offer bold new initiatives because of a budget accord he reached in 2011 with US House of Representatives Republicans that puts strict curbs on both domestic and military spending.
An agreement reached in December last year between congressional Republicans and Obama’s Democrats allowed a slight easing of curbs on spending in the current 2014 fiscal year, but outlays will be essentially flat in fiscal 2015, which begins on Oct. 1.
Because of the caps, spending on programs subject to annual review next year will total US$1.014 trillion compared to US$1.012 trillion — an increase of less than 0.2 percent.
Obama’s budget and the coming debate in Congress will focus on how to work within those limits.
“We’re on track to having discretionary spending the lowest as a share of the economy since we started recording discretionary spending in 1962,” White House Council of Economic Advisers Chairman Jason Furman said last week. “With that comes a lot of choices that we’d rather not be making ... there are pretty difficult choices in just about every area of the budget.”
Even with only a minuscule spending increase, Obama’s budget proposals are unlikely to become law anytime soon.
The divided US Congress controls the government’s purse strings and Republicans who hold power in the House disagree with policy priorities such as added spending on job training and other programs in Obama’s budget.
That means Obama’s blueprint is more of a campaign document than a road map to the country’s fiscal path over the next year. It will be used to guide messaging in the November congressional elections in which Democrats are fighting to keep control of the US Senate and avoid losing seats in the House.
The budget will flesh out a proposal Obama made in his State of the Union address to expand a tax break for the working poor known as the Earned Income Tax Credit. He wants to increase the size of the credit for workers without children.
The credit, which has been in place since the mid-1970s, is meant to give low-income workers an incentive to work rather than receive government handouts. However, it is substantially more generous for workers with children. Those with at least one child can receive up to US$3,305 this year, while the maximum for childless workers is US$496.
The benefit also begins to phase out at a much lower income level for childless workers — as soon as US$8,810, as opposed to at US$17,830 for a worker with one child.
“It will be a strong antipoverty measure,” said Jared Bernstein, a former economic aide to US Vice President Joe Biden who is now with the Center on Budget and Policy Priorities.
A 2009 Georgetown University paper put the cost of such an expansion at US$12.1 billion.
Another of Obama’s priorities is an expansion of early childhood education.
Advocates say that Obama’s “universal pre-kindergarten” idea would better prepare children for school and help workers by making childcare more widely available.
Obama proposed spending US$75 billion over 10 years and US$1.3 billion in the first year on the early education program in his budget for this year. He would have had smokers pay for it by increasing cigarette taxes to US$1.95 per pack from US$1.01 and indexing the tax to inflation.
While that issue gained little traction, Obama is betting a fall deadline will force action on another one of his proposals: US$302 billion for transportation projects, an idea he hopes will attract some Republican support.
Legislation authorizing federal highway, rail and transit spending lapses on Sept. 30. While both the AFL-CIO, the nation’s largest labor union, and the US Chamber of Commerce back efforts to upgrade transportation, Democrats and Republicans disagree on how to pay for highway repair.